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Bank predicts pick-up in growth in the new year

THE Bank of England will this week concede that economic growth has come in below its expectations, while inflation has overshot its forecasts. But it will also predict a significant pick-up in growth next year.

The Bank’s quarterly inflation report, closely watched in the City, will confirm that the cost of borrowing is likely to stay on hold until next year. It will also emphasise that there are significant “downside” risks to its prediction of stronger growth, leaving the door ajar for further rate cuts.

Interest-rate expectations have swung sharply in recent weeks, as stronger data on the economy and housing have led to predictions of a cut this month being replaced by fears of higher rates next year.

Michael Saunders, an economist with Citigroup, said that Mervyn King, the Bank governor, would warn against this year’s rise in world oil prices — now being reversed — feeding through into higher inflation